I would do a combination of what previous posters suggested. Explain to your daughter, if you think she will understand, that her grandma is not laughing AT her or making fun of her. And explain to your MIL that your daughter thinks her grandma is laughing at her, and is confused by it.
For people who think that the OP should stay out of the relationship between her daugher and MIL, and just let MIL enjoy her grandaughter, normally I would agree with that. But if the OP's daughter is confused by her grandma's behavior, or feels hurt by it, then the OP should say something.
I live far away from my parents, so we skype almost daily so they can see/talk to my son (their only grandchild, so far). My son is 2 years old. Some time ago, my parents would "offer" my son snacks over the computer. Obviously, my son is not going to be able take those snacks. But my parents thought it was funny when he would reach for the snacks. I noticed that my son was getting frustrated by this behavior. It wasn't like he would fall down screaming and have a tantrum, he just wouldn't be all smiley and cute when he reached for the snack and obviously got nothing. I asked my parents to stop doing that because I could tell that my son didn't find this as funny as parents were. Sure, I could have let my parents "enjoy their grandson", but shouldn't my son also "enjoy his grandparents"?
Here's an example of the opposite situation: Now that my son is finally talking, it's really, really cute. You know what is NOT cute? When a 50+ year old woman talks like a toddler. It grates on my nerves like you wouldn't believe. But my mom and my son BOTH find it funny, and both laugh and carry on like a couple of old friends. So, even though, I find my mother extremely annoying, I am definitely not going to say anything to her because that would be mean and petty.